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January 15, 2010
Spansion to Seek Approval for Exit
Financing
Computer flash memory maker Spansion Inc. will look to fund its exit
from bankruptcy with more than $559 million in financing, the Deal
Pipeline reported yesterday. At a hearing scheduled for Jan. 20, the
Sunnyvale, Calif.-based company will ask Bankruptcy Judge Kevin
Carey for approval of an exit financing package that includes a $450
million term loan from a group of lenders led by Barclays Bank plc and
Morgan Stanley Senior Funding Inc. as well as a $109.38 million rights
offering backstopped by an investment firm. Under the terms of the exit
loan agreement, filed in court on Jan. 11, the term loan will be priced
at either a base rate plus 450 basis points, with a base rate floor of
3.5 percent, or at the Eurodollar rate plus 550 basis points, with a
Eurodollar floor of 2.5 percent. The loan matures five years from the
closing date.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005377382'>Read
more. (Subscription required.)
Consumer Protection Agency Proposal in
Doubt
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is
considering scrapping the idea of creating a Consumer Financial
Protection Agency, the Wall Street Journal reported today. Dodd
has discussed the possibility of abandoning the push for a new agency
during negotiations with key Senate Republicans as a way to secure a
bipartisan deal on the legislation. Dodd's offer is conditional,
however: Republicans must agree to create a beefed-up
consumer-protection division within another federal agency. The apparent
willingness to forgo an independent consumer-protection agency would be
a major concession for Dodd, who had blasted the banking industry for
lobbying aggressively to prevent the creation of such an entity. Dodd's
shift comes amid a new sense of urgency to enact revamped rules
governing the financial sector in what is now a narrow window before the
href='http://online.wsj.com/article/SB10001424052748704363504575003360632239020.html?mod=WSJ_business_whatsNews'>Read
more. (Subscription required.)
Financial Inquiry Widens to Include
Past Regulators
The chairman of the commission investigating the 2008 financial
crisis said Thursday he planned to probe the actions of regulators back
to the Clinton Administration, broadening his inquiry beyond bankers,
the Wall Street Journal reported today. Commission chairman and
former California Treasurer Phil Angelides said that he wanted to know
'what did the FBI, the Fed, the Department of Justice and others know
about subprime lending; when they know it, and why didn't they act?'
Angelides said that former Federal Reserve Chairman Alan Greenspan and
current Chairman Ben Bernanke likely would be called to testify at
future commission hearings. He also mentioned former Securities and
Exchange Commission heads Christopher Cox, William Donaldson and Arthur
Levitt as likely witnesses. Angelides's comments came after the
commission heard yesterday from current regulators, who detailed how
various government agencies—
lang='RU'>including the Federal Reserve and the SEC
lang='EN'>—failed to attack the fraudulent
mortgages and toxic assets that contributed to the financial-market
meltdown in 2008. Angelides said that future hearings would examine the
roles of officials from the Bill Clinton and George W. Bush
administrations.
href='http://online.wsj.com/article/SB10001424052748704281204575002783839802528.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Bernanke Defends Fed
lang='EN'>’s
Oversight Role
Facing renewed calls from Congress to limit its authority, the
Federal Reserve yesterday defended its role as one of Wall Street
lang='EN'>’s chief watchdogs and said that
being able to monitor the health of banks was crucial to setting sound
monetary policy, the New York Times reported today. In a report
sent to the Senate Banking Committee, Federal Reserve Chairman Ben S.
Bernanke argued that stripping the Fed of its powers would leave the
financial system more vulnerable to collapse. Eliminating the central
bank’s supervisory
role, the report said, would
size='2'>“severely undermine the Federal
Reserve’s ability to
obtain in a timely way and to evaluate the information it needs to
conduct its central banking functions effectively.
face='Verdana' size='2'>” Bernanke, who is
awaiting confirmation by the Senate for a second term, said that while
he did not believe the Fed should be responsible for monitoring the
entire financial system, he did envision an expanded role for the
agency. The report said the central bank should be able to look
for “
size='2'>systemic risk
size='2'>” in a highly interdependent
network of banks. Bernanke also said that it was essential that the Fed
be able to gauge the financial health of the institutions to which it
might lend money.
href='http://www.nytimes.com/2010/01/15/business/economy/15fed.html?ref=business&pagewanted=print'>Read
more. (Subscription required.)
Ambac May Owe Up to $1.2
Billion Because of Las Vegas Monorail Bankruptcy
face='Times New Roman' size='2'>
Bond insurer Ambac Assurance Corp. may owe as much as $1.2 billion
because of yesterday
lang='EN'>’s bankruptcy filing by Las Vegas
Monorail Co., Bloomberg News reported yesterday. Ambac insured at least
$451 million in bonds issued in 2000 when Las Vegas Monorail bought the
3.9-mile-long line from MGM Grand-Bally
lang='EN'>’s Monorail Limited Co. Should
Las Vegas Monorail fail to make another payment on those bonds, Ambac
would be required to cover the losses, the company said in court papers
filed yesterday. Ambac asked Bankruptcy Judge Linda Riegle to
dismiss Las Vegas Monorail’
lang='RU'>s case, arguing that it must be refiled under chapter 9, which
is reserved for government entities. Ambac argued in court papers that
Las Vegas Monorail is actually a municipality because it is controlled
by the government of Nevada.
href='http://www.businessweek.com/news/2010-01-14/ambac-may-owe-up-to-1-2-billion-because-of-monorail-bankruptcy.html'>Read
more.
Pension Plans in Bankruptcy Angers Retirees
The lack of understanding as to what companies are obligated to do about
their various pension plans during bankruptcy often ends up pitting
companies against pensioners, according to a report in
today’
lang='RU'>s Dow Jones Daily Bankruptcy Review. Under its
restructuring plan, which a bankruptcy judge will consider approving
Friday, Reader's Digest promises its unsecured creditors--including the
pensioners--$4 million, which amounts to a recovery of up to 3.6 cents
for every dollar they're owed. Reader's Digest said that while the
company 'sincerely' regrets the difficulty some of its retirees now
face, it simply isn't able to continue funding the benefits. In Delta
Air Lines' 2005 chapter 11 case, retired pilots sued to force the
company to pay out their nonqualified benefits, which had previously
cost the airline an average of $75 million per year. Delta, however,
argued it couldn't make these payments without the bankruptcy court's
authorization. The two sides eventually struck a deal that allowed the
retired pilots $719 million in unsecured claims under those benefit
plans. Reader's Digest said that it is trying to make things easier for
some of its 'less fortunate retirees,' winning its senior secured
lenders' permission to pay them up to $1 million in cash once the
company has emerged from bankruptcy. As for its other retirees who lost
their nonqualified benefits, the company said many of them 'were very
senior executives' and just 18 of them hold claims for more than 50
percent of the total benefit claims.
Crabtree & Evelyn Receives Approval to
Exit Bankruptcy
Bankruptcy Judge Burton Lifland yesterday approved a
reorganization plan from U.S. retailer Crabtree & Evelyn Ltd, paving
the way for the seller of soaps, fragrances and lotions to exit court
protection later this month, Reuters reported. The Woodstock,
Conn/-based company, which is owned by Kuala Lumpur Kepong Berhad and is
a unit of Britain's Crabtree & Evelyn Holdings Ltd, had filed for
chapter protection in July as consumers cut back on spending during the
economic downturn and its sales dropped. During the bankruptcy the
company cut its number of stores to 91, down from the 126 stores it had
when it filed for bankruptcy. Crabtree said in a statement on Thursday
it expects to close on a $26.3 million exit financing facility from KLK.
KLK had also provided a $40 million debtor-in-possession financing
facility to keep the company operating during bankruptcy.
href='http://www.reuters.com/article/idUSN1418543920100114'>Read
more.
Court Gives
Tronox Final Approval on Bankruptcy Financing
A bankruptcy court gave final approval yesterday allowing bankrupt
U.S. chemicals maker Tronox Inc. to tap a $425 million in bankruptcy
financing provided by a group lenders led by Goldman Sachs Lending
Partners, Reuters reported. The company received interim approval in
December. The judge's final approval included details on the payment of
fees incurred to backstop parties that hold senior unsecured debt. The
case is In re Tronox Inc., U.S. Bankruptcy Court, Southern
District of New York, No. 09-10156.
href='http://http//www.reuters.com/article/idUSN1415557920100114'>Read
more.
Protective Products of
America Files for Chapter 11
Protective Products of America Inc., a producer of
bulletproof vests and body armor, filed for chapter 11 yesterday and
said that it agreed to sell most of its assets to a private equity firm
for about $8 million, Reuters reported. An affiliate of private equity
firm Sun Capital Partners Inc. will also assume certain specified
liabilities and set the floor at an auction supervised by the bankruptcy
court, court papers showed. The company said the deal was subject to a
higher and better offer by another party in about 35 days and that it
intends to maintain all normal business operations throughout the
bankruptcy process. The deal with Sun Capital allows PPA to retain
certain assets, including some avoidance actions and tax refunds, which
it believes are worth about $5.5 million, the company said in a court
filing. The case is In re Protective Products of America
Inc., U.S. Bankruptcy Court for the Southern District of Florida
(Fort Lauderdale), No. 10-10711.
href='http://www.reuters.com/article/idUSSGE60D0ER20100114'>Read
more.
Extended Stay
Receives Extension on Exclusivity for Filing Chapter 11
Plan
Bankruptcy Judge James Peck said yesterday that
he would grant Extended Stay America Inc.'s request for more time to
file its chapter 11 reorganization plan, Reuters reported yesterday.
Judge Peck granted the company's request to extend the exclusivity
period through April 2, an addition of 60 days. The company can can
solicit support for the plan through May 31. The case is In re
Extended Stay, U.S. Bankruptcy Court for the Southern District of
New York, No. 09-13764.
href='http://www.reuters.com/article/idUSN1418542820100114'>Read
more.
Wilmington Trust
Wants Examiner to Probe Tribune LBO
A major bondholders' trustee for bankrupt news giant
Tribune Co. says that the only way to protect the interest of
bondholders is to appoint an examiner to investigate a 2007 leveraged
buyout that left Tribune with debts surpassing $11 billion,
Bankruptcy Law360 reported yesterday. Wilmington Trust Co.,
indenture trustee for exchangeable subordinated debentures worth about
$1.2 billion, filed a motion on Wednesday in the U.S. Bankruptcy Court
for the District of Delaware urging the court to appoint an examiner to
look into the buyout. Wilmington Trust, a member of the unsecured
creditors committee, became the latest bondholder representative to
allege that the buyout directly caused Tribune's decline into
bankruptcy. The buyout allowed the company to cash out its existing
shareholders and gave billionaire Samuel Zell the approval to buy 40
percent of its common stock. Tribune financed the agreement by entering
a nearly $8.3 billion senior secured credit agreement with JPMorgan
Chase & Co., with Merrill Lynch Capital Corp. acting as a
syndication agent and Citicorp North America Inc., Bank of America NA
and Barclays Bank PLC serving as co-documentation agents. It also
received a $1.6 billion bridge facility extension from the
banks. Read
more. (Subscription required.)
FairPoint Receives
Extension to File Reorganization Plan
FairPoint Communications Inc. said yesterday that the
deadline to file its chapter 11 reorganization plan has been extended to
Feb. 1, the Associated Press reported yesterday. The company had hoped
to file the plan today after pushing back the original deadline from
Dec. 10. The company said it will use the extra time to finalize
settlements with lenders, unions and other parties involved in the
process. FairPoint filed for chapter 11 protection on Oct. 29. The North
Carolina-based company has been hobbled by a heavy debt load and
operational problems since it purchased Verizon Communications' land
line and Internet operations in Maine, New Hampshire and Vermont in 2008
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/14/AR2010011403487_pf.html'>Read
more.
JPMorgan Chase Earns
$11.7 Billion in 2009
In a remarkable rebound from the depths of the
financial crisis, Morgan earned $11.7 billion last year, more than
double its profit in 2008, the New York Times reported today. The bank
earned $3.3 billion in the fourth quarter alone and JPMorgan said that
2009 net income rose to $2.26 a share. That compares to profit of $5.6
billion, or $1.35 a share, during 2008 when the panic gripped the
industry. Revenues grew to a record $108.6 billion, up 49 percent.
JPMorgan Chase pulled off a profit in the fourth quarter after a solid
trading performance helped offset large consumer losses. The bank set
aside another $1.9 billion to its consumer loan loss reserves.
href='http://http//www.nytimes.com/2010/01/16/business/16morgan.html?ref=business&pagewanted=print'>Read
more.
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